You know, for all the pessimism, Detroit is not beyond redemption. Aside from the hand wringing, the one thing we should consider is how Detroit can be made a laboratory for urban policy. The judge in a bankruptcy court has broad powers, so here are a few things that can be done fairly quickly:

1. Exempt utilities and the municipal government from the requirement of servicing neighborhoods where such services create a loss for the provider. By way of example, that would exempt these entities from providing sewer, electrical, water, police or fire protection to areas where the abandoned property far exceeds the used properties.† Provide a mechanism for actual contraction and relocation out of those areas.

2. Exempt corporations from labor and union laws which hinder the harnessing of the available labor pool. In other words, create an economic zone in which labor is priced according to the financial need of the workers in a place in which housing costs are not driving up financial need. This would encourage factories to set up shop in close proximity to labor in the same way factories operate in China. Anyone who doesn’t want to stay in Detroit and work in one of these factories is always free to leave the city and go find work elsewhere. The exemption would include an exemption from the Obamatax as well.

3. Auction off most of the city. Once abandoned neighborhoods are cleared, sell off about half of the city. Land always has value. Allow the land to be bought by institutional investors. They won’t lose. Even if it becomes farmland, the value will be higher than current value.

4. Shrink the government. We’ve never had a real experiment with true libertarian practices. Once all of the city property is sold, experiment with outsourcing police, fire and schools. It’s never really been tried. Detroit is a place with nothing left to lose.

5. Ban borrowing. Another idea whose time has come. The advantage of a balanced budget, and no ability to float bonds, is that it forces the administration to really debate fiscal policy, something that hasn’t happened in Detroit since about 1850.